Lottery officials assess ‘faux fraternals’
CHARLESTON, W.Va. — Lottery commissioners reviewed violations of state lottery laws by 17 fraternal organizations Tuesday and focused concerns on two organizations that want to continue to operate lodges that are not located in their home counties.
“Obviously, when you have an organization that’s three counties away from its [gaming] facility, 80 or 100 miles away, that makes no sense,” Commissioner Michael Adams said during a work session to review the findings of a nine-month investigation of so-called faux fraternals — Limited Video Lottery locations that operate under the guise of being fraternal lodges in order to have 10 LVL machines, instead of the maximum of five permitted in bars and clubs.
The issue surfaced last fall, when bar owners complained about fraternal “lodges” located long distances from where the organizations are chartered.
Of those investigated by the Lottery, the Mercer County Fraternal Order of Police and the Fraternal Order of Orioles Post 299 have since surrendered their Lottery licenses; the Clarksburg Elks Lodge had its national charter revoked; and the Princeton FOP is inactive while it seeks a lodge location in its home county.
Another fraternal, the West Virginia State FOP Lodge, moved its headquarters from Charleston to Clarksburg, where its lodge/gaming facility is located, in order to comply with Lottery regulations, commissioners were advised.
At issue Tuesday were the Monongalia-Preston FOP Lodge and the Marshall County FOP, which want to continue to operate lodges in New Martinsville, in Wetzel County, proposing in their corrective action plans to begin holding their lodge meetings in the Northern Panhandle town.
During discussions Tuesday, commissioners were adamant that the lodges must be in the same county where the fraternal organizations are chartered.
“It makes perfect sense the [gaming] location has to be where the charter is,” Adams noted.
“Are we really discussing whether the Mon-Preston Lodge meets in New Martinsville? Of course they don’t,” Commissioner David McCormick commented.
John Melton, retired Lottery Commission attorney who helped draft the Limited Video Lottery legislation, told commissioners the intent of the law was to set high standards for fraternal organizations in order to receive special status to have 10 LVL machines.
“We’ve always told folks, when I was there, where you have your meetings, where you have your charter, that’s the only place you can have machines,” he said.
Tuesday’s meeting was a work session, and commissioners will take action regarding Lottery violations at the commission’s meeting in September.
Also, Lottery attorney Danielle Boyd said consent agreements had been reached with two LVL machine distributors who had set up the faux fraternals — by providing the fraternal organizations with turnkey gaming operations that they could claim were their lodges.
Action Gaming in Wheeling agreed to pay $190,000 in fines, while Buck’s Inc. in Clarksburg will pay $60,000 in fines.
Boyd also noted that several of the eight fraternal organizations that self-reported Lottery violations reported that they were allowing nonmembers to play LVL machines.
Under both Lottery regulations and U.S. Internal Revenue Service rules, only members of the fraternal organizations and bona fide guests may play LVL machines in locations licensed as fraternal lodges.
She said corrective action plans for those fraternals include directives for keeping nonmembers from playing the machines.
Lottery Director John Musgrave said Lottery auditors and investigators will conduct random audits of fraternal organizations that did not self-report any violations.
In May, the Lottery gave all 166 fraternal organizations operating LVL 30 days to self-report any violations of Lottery regulations, in exchange for reduced fines for any violations.
Musgrave noted the organizations were not required to submit reports if they had no violations, but will be subject to the spot audits to verify that they are operating properly.
Reach Phil Kabler at email@example.com, 304-348-1220 or follow @PhilKabler on Twitter.